Do Dog Food Sales Show Retailers how to Claw Back Against Amazon’s Dominance?

Is There Any Way to Overcome Amazon’s Dominance?

It’s no doubt that Amazon rules e-commerce. It’s been reported that the retail giant nabbed almost 44% of all e-commerce sales in 2017 and will account for half of all online sales in the next five years. And they show no sign of slowing down. Jumpshot data shows that in last 2 years Amazon has seen 43% annual growth of total products sold.

Furthermore, they are eating almost every product category that we take a look at, growing in market share among all retailers in a diverse cross-section of the retail environment. See below:

Share of purchases compared to other eCommerce marketplaces, Q4 2017 and Q1 2018

In the face of such dominance, is there any hope for brands, retailers, and other online marketplaces?

A Tale of Two Brands

In the chart above, you’ll note that Amazon’s sizable share of the pet food category was flat quarter-over-quarter. Why?

We decided to dig a bit deeper and just focus on dog food. To make it even simpler, we measured purchases of the two leading lines of dog food brands on all online marketplaces over the course of 2017: Blue Buffalo and Purina. Despite their slightly higher price point, Blue Buffalo has consistently been able to drive similar conversions online to Purina. Blue Buffalo’s premium pricing and loyal customers recently caught the attention of General Mills, which announced in February they were buying the brand for $8 billion.

In addition to a pricing differential, the two brands also significantly differ in where the majority of their online sales convert. Jumpshot data shows that for Purina, Amazon’s dominance helped to drive 62% of their online conversions. Yet only 35% of Blue Buffalo’s customers used the e-commerce giant for their purchase. So where are Blue Buffalo’s customers converting?

David and Goliath

While everyone knows about Amazon, few non-pet owners know about Chewy.com. This Miami-based start-up launched in 2011 and focuses just on selling pet food. In its first five years, Chewy.com was able to get nearly 51% of all the online sales of pet food, according to a measurement of total online sales dollars from 1010 Data. Blue Buffalo was its top-selling brand, accounting for over 12% of all their sales.

So coming into 2017, the small start-up was already competing well against Amazon. Yet looking at the two biggest dog food brands, Purina and Blue Buffalo, our data shows that Chewy.com started 2017 with just 49% of online sales, while Amazon took 51%.

Halfway through the year, something dramatic happened. Our data shows a shifting tide away from Amazon and to Chewy.com.

Counting total purchases by month in 2017 for the leading lines of dog food shows Chewy.com taking a lead in overall market share against Amazon.

How was Chewy.com Outselling Amazon?

Chewy.com wasn’t doing it by converting more customers. While 32% of customers who search for dog food or look at a dog food product page on Amazon ultimately convert there, Chewy.com only has a conversion rate of 15%. That means Chewy.com had to get more customers coming to their site. A lot more.  And that’s what they did.

Chewy.com started aggressively bidding and spending on Google AdWords to drive a flood of new traffic to their website. Out data shows that while Amazon relies heavily on Organic traffic, Chewy.com paid for 78% of their website traffic for customers who end up interacting with dog food products. That’s the inverse of Amazon, where 78% of their dog-food traffic in 2017 was organic.

Now, whenever you search for Blue Buffalo on a search engine, you’re sure to see display and search ads from Chewy.com. It’s this aggressive digital advertising that has allowed Chewy.com to compete with Amazon. 

So far, Blue Buffalo has taken advantage of this swing, selling more on Chewy than on Amazon. This may help explain why they’ve taken more market share at large than Purina has.

Total Blue Buffalo and Purina purchases by retail channel in 2017.

Lessons Learned

Chewy.com is a valuable case study for digital marketers looking for proven ways to compete in an Amazon-dominated marketplace. And it comes down to marketing basics.

• Have a good product
• Have a good experience
• Focus on a segment or niche
• Aggressively focus on customer acquisition
• For commodities, put your marketing eggs into advertising

Chewy has implemented programs like their subscription service, Autoship & Save, and low-cost shipping to keep customers coming back and capitalize on the success of their acquisition strategy.

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